EMEA Morning Briefing: Markets Await Fed Decision, Tech Earnings

MARKET WRAPS

Watch For:

Money Supply in the euro area; Germany Consumer Confidence Index; trading updates from Remy Cointreau, Lonza Group

Opening Call:

European stock futures edged higher. Asian stock benchmarks gained in holiday-thinned trade with most markets closed for the Lunar New Year; the dollar weakened slightly; Treasury yields were mostly lower; while oil futures fell and gold gained.

Equities:

Stock futures were higher early Wednesday as markets await the Federal Reserve's interest-rate decision and continue to parse corporate earnings.

While the Fed is widely expected to keep rates steady, updates on how Fed Chair Jerome Powell views the path forward for the economy and price growth will likely be market moving.

Also, as the dust clears from Monday's DeepSeek panic, investors are closely watching tech earnings with Microsoft due to report fiscal second-quarter earnings later today. Commentary from the Magnificent Seven companies reporting earnings this week, will be key in reassuring the market.

"Strong earnings reports would be a powerful combo for the potential beneficiaries of cheaper AI models (the average tech stock)," said 22V Research's Dennis DeBusschere.

"There are a lot of questions outstanding about DeepSeek's model and how much it really cost, but it was a shoot first and ask questions later type of day. Focus turns to AI earnings commentary this week."

Forex:

The U.S. dollar weakened slightly against Asian currencies with trading thinned by Lunar New Year holidays across most of the region. The focus is likely to be on the FOMC which is widely expected to leave its policy rate unchanged after signaling that the pace of rate cuts will slow, CBA's Kristina Clifton said.

However, "there is a risk that Chair Powell sounds hawkish if he wants to assert the FOMC's independence against the backdrop of President Trump urging the FOMC to cut interest rates," the senior economist and currency strategist said.

Bonds:

Treasury yields finished slightly higher on Tuesday as calmer conditions across global markets reduced demand for U.S. government debt and as investors looked ahead to the Fed's first monetary policy decision of the year.

Markets expect Chair Powell to shed some light on how the Fed may react to tariffs and other policies. "We are still finding our way around," AmeriVet's Gregory Faranello said and is uncertain about the path for the benchmark 10-year Treasury yield. "Do I think we have a shot to still test 5%? I think the answer has to be absolutely yes."

But he also sees a possible move lower depending on the Fed's assessment of how tariffs and other policies are driving inflation. "There's definitely going to be some volatility."

Energy:

Oil futures were lower in Asia. Signs of stronger oil supply were offset by a broader risk-on tone across markets, the ANZ Research team said. The impact of a media report that Russia was testing U.S. sanctions by sending oil on vessels blacklisted by the U.S. to India has been offset by the recovery of oil supply disruptions in Libya, ANZ said.

Focus is now on OPEC's supply policy, with the OPEC+ due to meet next week to review supply curbs, ANZ added.

Metals:

Gold gained as investors await the outcome of the Fed's policy meeting where interest rates are widely expected to be kept on hold. Market participants would be particularly interested in Fed Chair Powell's speech, where he could address President Trump's calls for rate cuts and potentially hint at the next steps in monetary policy, said Hassan Fawaz, GivTrade's chairman and founder.

Trump's potentially inflationary policies may prompt the central bank to maintain higher rates for longer, which could weigh on the precious metal, he added.

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Copper ticked higher in Asia. The sentiment was muted due to a lack of market participation given the Lunar New Year holidays, Daria Efanova, head of research at Sucden Financial said. There is also little clarity about Trump's tariff threat on U.S. imports of copper, aluminum, and steel, including timing and scale, Efanova said.

Currently, tariffs stand at 10% on aluminum and 25% on steel, with no formal tariffs on copper, Efanova noted.

TODAY'S TOP HEADLINES

U.S. Consumers Lose Confidence at Start of Trump's Second Term

Confidence among U.S. consumers weakened for a second-straight month, reflecting retreating optimism of both current and future conditions at the start of President Trump's second term and expectations that inflation will rise again.

The index of consumer sentiment published by the Conference Board, a research group, fell 5.4 points to 104.1, it said Tuesday, worse than the 106.0 expected by economists polled by The Wall Street Journal.

Louis Vuitton Owner's Sales Beat Forecasts Despite Weak Growth

LVMH Moet Hennessy Louis Vuitton, the world's largest luxury group, posted fourth-quarter sales ahead of analysts' forecasts, but weak growth shows that the industry is struggling to turn the page after months of sluggish demand for luxury goods.

The French luxury empire reported revenue of 23.93 billion euros ($25.11 billion) for the final quarter, 1% higher organically compared with the year-earlier period. Analysts had forecast revenue of EUR23.50 billion and expected the luxury behemoth led by Bernard Arnault to post an organic decline of 1.26%, according to a poll of estimates compiled by Visible Alpha.

Novo Nordisk's Ozempic Gets FDA Approval as Kidney-Disease Treatment

Novo Nordisk said the Food and Drug Administration approved the diabetes-drug Ozempic to be used to help kidney-disease patients.

Ozempic, or semaglutide, can now be used to reduce the risk of worsening kidney disease or kidney failure in adults with type 2 diabetes and chronic kidney disease, the company said Tuesday.

DeepSeek's Rise Exposes Nvidia's Weakness

DeepSeek's dramatic rise exposes the greatest risk facing Nvidia: that the intense demand for its advanced chips could wane.

Nvidia's success as the computational arms dealer for the artificial-intelligence boom has made it a target for a host of rivals seeking to diminish its dominance. That list includes other chip makers and customers who are developing their own AI chips to reduce their spending. But few in the tech world saw a nimble Chinese AI model as a risk to Nvidia's business, even if the final effect is unclear.

Kohl's Cuts 10% of Its Corporate Workforce

Kohl's is cutting roughly 10% of its corporate workforce, two weeks after installing a new chief executive.

The cuts affect fewer than 400 positions. More than half of the reductions will come from eliminating unfilled positions, according to a spokeswoman. The rest will come from eliminating roles that report into its Menomonee Falls, Wis., headquarters.

Sony Group Names COO Hiroki Totoki as New Chief Executive

Sony Group said Chief Operating Officer Hiroki Totoki, who has led the company's growth in entertainment content, would become chief executive on April 1.

The Japanese entertainment and electronics company said Wednesday that Lin Tao, who currently serves as senior vice president for finance at videogame unit Sony Interactive Entertainment, would become the group's new chief financial officer.

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Expected Major Events for Wednesday

07:00/GER: Jan GfK consumer climate survey

07:00/SWE: 4Q Flash GDP

07:45/FRA: Dec Housing starts

08:00/SPN: 4Q Preliminary GDP

08:30/SWE: Swedish repo rate announcement

09:00/EU: Dec Monetary developments in the euro area (M3)

09:00/AUT: Jan Austria Manufacturing PMI

09:00/ITA: Jan Business Confidence Survey

09:00/ITA: Jan Consumer Confidence Survey

10:00/ITA: Dec Foreign Trade non-EU

10:00/BEL: 4Q Preliminary GDP

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This article is a text version of a Wall Street Journal newsletter published earlier today.